Financial crime hit record levels in 2010, with the Government overtaking the
financial services industry as the main victim, according to the KPMG Fraud
Barometer.

Fraud committed by company managers was the fastest growing area, up 30pc in value to £441m against the previous year. Tax fraud, money laundering and complex cases involving new technology all increased in the year. According to KPMG many of the cases were directly linked to the tight economic conditions.

Hitesh Patel, KPMG forensic partner, said: "Government agencies, like commercial businesses, have been increasingly vulnerable to the threat of fraud. In a year of austerity measures implemented by Government, tax increases, rising unemployment, and significant structural change it is hardly surprising that the long fingers of the fraudster have reached into the public purse."

The total number of fraud cases reported in the UK last year rose 16pc to 315, worth just under £1.4bn, according to the KPMG fraud barometer, which only records cases worth in excess of £100,000 that have been heard or are due to be heard in the High Courts. The real level of fraud, undetected and unprosecuted, is almost certainly a significant multiple of this figure.

The public purse bore the brunt of the cases in 2010, overtaking financial services as the main victim of fraud. Just over 42pc of all cases targeted the Government, in total worth £593m. The number of such cases increased from 59 to 70 in 2010.

Mr Patel said: "Businesses trying to survive and individuals seeking to maintain lifestyles by whatever means will have undoubtedly driven the numbers up – it is these same vulnerable groups that will have been the prey for professional criminals."

The sharp rise in cases involving company management is thought to be linked to the pressure directors have been under to perform in the recession and its aftermath. The level of fraud linked to employees was roughly a third that of management at £129m. Cases of fraud perpetrated by managers were much higher by value, averaging £7.2m per case against £1.6m for employees.

Although fraud detection normally increases during and just after recessions, the current economic downturn has not seen the expected spike in activity – until now. Many legal experts attribute the lack of prosecutions to police forces around the country downsizing their fraud squads during the Labour administration. Never a key sector under Labour, many fraud squads were either disbanded or demoted from 1997 to 2010.

However, one area where the corporate world seems to have had some success tackling financial crime is in mortgage fraud. Although instances of mortgage fraud were rife in the first half of the year they plummeted from July to December, the total number of cases dropping from 21 to 13 between the first and second half of the year.

One of the largest cases to appear in the KPMG Fraud Barometer involves alleged fraudster Michael Richards, 48. The businessman stands accused of masterminding one of the biggest direct tax frauds in UK history.

Although the case has yet to reach trial Mr Richards is accused of making fraudulent bids worth £103m in tax breaks on research into green technologies. Prosecutors say rich investors were lured into the scheme. Mr Richards is charged with six offences in total. The case is unlikely to reach court until 2012.

Meanwhile KPMG says that fraudsters are beginning to target new technology, as one case in the Midlands demonstrated. In this instance, a DJ was accused of plotting a credit card scam on the iTunes website.

Both the man and his 10 accomplices targeted the Apple and Amazon sites with 20 songs which they then sold through them. It is thought that they then stole approximately 1,500 credit cards to buy the songs, and then claimed back just under £469,000 in royalties.